After proposals to transform the disused Southsea police station, in Highland Road, into 18 apartments were approved last year, applications to build homes in two neighbouring car parks were submitted by the same developer.
Work has now started to renovate the station, which was built in 1932 and will not be demolished.
But plans for the four terraced houses and four detached homes have been stalled, following advice from Natural England that housebuilding releases damaging nitrogen into the sea.
Until a solution is found the applications cannot go to Portsmouth City Council's planning committee for a decision.
Agent for London-based applicant Martin Finerty, Ian Maylan, said: 'Work has begun to strip things out of the station. The police station is due to be finished by April, and we wanted to start work on the other homes after that.
'The nitrates situation has held up every single housing scheme in Portsmouth. When I last spoke to a council officer he was optimistic the plans to mitigate nitrates would go through soon.'
Any building across the south of Hampshire that would create additional bedrooms was postponed in May due to the Natural England advice.
In a report on both applications Natural England said: 'As submitted, the application could have potential significant effects on the Solent Special Protection Areas and Ramsar sites and the Solent Maritime Special Area of Conservation.
'The following information is required: a habitats regulations assessment with a calculation of the nutrient budget for the development and the identification of mitigation, where appropriate.
'Without this information, Natural England may need to object to the proposal.'
It is planned both sites would be provided with parking - nine spaces for the terraced homes and 13 for the semi-detached homes, with two disabled spaces.
The car park behind the police station will be retained to provide 16 spaces.
Portsmouth City Council is expecting feedback on its nitrogen mitigation plans from Natural England within the next two weeks.